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EU agrees to billion-euro bridge loan to shield Greek deal

Thu, Jul 16, 2015 - 8:40 PM

Euro-area finance ministers authorized a 7 billion-euro bridge loan to Greece, according to Irish Prime Minister Enda Kenny, paving the way for a third bailout that may allow Europe's most indebted nation to stay in the common currency.

PHOTO: REUTERS

[BRUSSELS] Euro-area finance ministers authorized a 7 billion-euro bridge loan to Greece, according to Irish Prime Minister Enda Kenny, paving the way for a third bailout that may allow Europe's most indebted nation to stay in the common currency.

The financing deal is expected to be announced on Friday after national parliaments have voted on the aid accord that Prime Minister Alexis Tsipras pushed through his legislature on Monday, according to an official with knowledge of the discussion, who asked not to be named because the talks are private. Member states also must consider whether to move ahead with the full bailout proposed for Greece.

The short-term financing is needed so that Greece can meet a 3.5 billion-euro payment due to the European Central Bank on Monday, and keep the country afloat while Tsipras negotiates the details of a three-year bailout of as much as 86 billion euros. That aid package would come from the euro-area's permanent firewall fund, the European Stability Mechanism.

"I would expect that Mario Draghi will consider now turning on the tap to some extent of emergency liquidity to keep the banks in Greece having money for their customers," Mr Kenny said in an interview with Irish broadcaster RTE, referring to the president of the ECB.

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The bridge loan will come from the European Financial Stabilisation Mechanism, the European Union's rescue fund, the official said. The EU is still working on safeguards to shield non-euro nations from Greek bailout risk, European Commission spokeswoman Annika Breidthardt told reporters in Brussels.

"Once adopted the funds could be disbursed rapidly," Ms Breidthardt said in reference to the bridge financing.

Eurozone officials are trying to find a way to make the rescue program work after the bloc's leaders thrashed out a deal during 17 hours of talks. Tsipras cleared his first hurdle when he won support in the Greek parliament for a new round of austerity in a vote in the early hours of Thursday.

For the bridge loan to proceed, it needs approval from all 28 EU nations. Finance ministry deputies are planning to hold another conference call Thursday with the intention of signing off on a deal by Friday.

Safeguards for non-euro area nations will be needed to win support from the UK, Denmark and others who've said they won't approve an EFSM loan if their taxpayers are at risk.

"We think it's an important principle that we are not having the money of British tax payers used to support eurozone bailout," Helen Bower, a spokeswoman for UK Prime Minister David Cameron, told reporters on Thursday in London.